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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (60340)	5/5/2006 2:30:15 PM
From: 8bits	Read Replies (1) of 110194

Russ comments on the real rate of mortgage applications in Florida: Message 22419799 "I thought the jump in activity was a little surprising as well, although as Sloan says the "index can be volatile". I asked Mike Morgan at MorganFlorida if he could step outside Florida and comment on the numbers. Here was his reply: A year ago most speculators did not have to close on homes. They could simply flip their contracts prior to closing. No need to apply for a mortgage. That was shut down starting about a year ago. So we actually have a double counting of mortgage applications being reported now. The flippers that never had to get a mortgage before now have to get a mortgage and close, even if they are flipping the property the same day and the new buyer has to get a mortgage. So not only are mortgage applications not realistically up, but they are substantially down. The Fed and MBA is double counting mortgage apps for those flippers that only need the mortgages to close. The builders are not selling more homes. Take out the flippers and you have a horrible decrease in “true” mortgage applications. The real year-to-year numbers will not show up for another year. There is no soft landing to this housing market. The smart money knows this and is positioning accordingly. The money that sits on the Street and does not make a trip out in the field is still star struck by the numbers based on misleading foundations. I’ve had a few analysts and media people fly down and tour the area. Their responses have been amusing. One big analyst cut his trip short after seeing the number of houses for sale in new developments and the number of high-rise condos going up. He said he had seen enough and started calling clients on our way back to my office! The Street needs to get out in the field and see the thousands of homes for sale in active developments, where builders are competing with the flippers that have are desperate to sell their properties. There is no way for the builders to compete with these guys, unless the builders want to slash margins by 25-35%. If they slash margins to compete, they will lose money."

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